BDO has undertaken some research to assess the progress UK organisations reporting under the UK Gender Pay Gap Regulations have made in closing the gender pay gap. Read our report “UK Gender Pay Gap: Are UK organisations any closer to closing it?” to learn more about the key trends and developments we see since the reporting requirement was first implemented in 2017/18.
UK Gender Pay Gap: Are UK organisations any closer to closing it?
Findings from all six reporting years September 2023
01 UK GENDER PAY GAP | BDO LLP
Introduction
The UK Gender Pay Gap (‘GPG’) Regulations (‘the Regulations’) have been in place for six reporting years since 2017/18, including a year of voluntary reporting due to the COVID-19 pandemic. The Regulations stipulate that entities with over 250 employees in the UK on the relevant snapshot date are required to disclose several GPG metrics using a predefined methodology. When the UK first implemented the GPG reporting, it was seen to be pioneering, with the hope of instigating widespread change. Since then, other nations have followed suit and adopted regulations to address similar concerns. More recently, the European Parliament approved the EU Pay Transparency Directive, aimed at enhancing the principle of equal pay through various measures focused on pay transparency. Nevertheless, throughout the six reporting years in the UK, numerous voices have debated the intricacies of the methodology, often describing it as a ‘blunt instrument’ due to the lack of enforceability for non-reporting or late reporting, and most importantly, questioning the efficacy of the regulations to close the GPG. This year, BDO has undertaken some research to assess the progress UK entities reporting under the Regulations have made in closing the GPG. To do this, we have identified entities that have consistently disclosed GPG data for the totality of the period the reporting requirement has been in existence for (i.e., six years). We established that there were c. 5,300 entities that meet these criteria.
Participants by industry
Education Manufacturing Administrative & Support Services Health & Social Work Professional, Scientific & Technical Retail Public Services Financial Services Technology Transportation & Storage Construction Hospitality Arts, Entertainment & Recreation Real Estate Other service activities Energy Utilities
5.2%
Participants by number of employees Participants by number of employees
10% 15% 20% 25% 30% 35% 40%
0% 5%
Less than 250
250 to 499
500 to 999
1000 to 4999
5000 to 19,999
20,000 or more
Number of employees
X We have utilised data that was disclosed on the UK Government portal as of May 2023 X All industry data has been derived from each entities’ Standard Industrial Classification (‘SIC’) code X We have run some statistical analysis on the reported GPG figures for each respective entity. Please note that all averages are unweighted (i.e., regardless of the size of entities’ headcount).
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At a glance
From a statistical perspective, it is evident that there has not been any substantial shift in any of the reported metrics. This outcome might not be entirely unexpected, although it is still somewhat disappointing. However, we do believe the Regulations have had some positive impact on closing the GPG as we can see improvements have been made in several areas, as shown below. More importantly, the transformation in attitudes and the evolution of disclosure practices have been a key driver for companies to prioritise the development of action plans aimed at addressing gender pay gaps and broader DEI agendas. While more changes are evidently necessary, it is important to acknowledge that gender pay disparities are deeply embedded in the society and require a considerably longer time frame than just six reporting years to rectify.
2. Data shows higher representation of females in higher paid positions
1. Both mean and median hourly pay gaps have narrowed over the reporting periods
Female representation in Upper quarter
2017/18
38.80%
15.07% In 2017/18
12.97% In 2022/23
2022/23
40.69%
Mean hourly pay gap
Female representation in Upper Middle quarter
2017/18
44.95%
13.21% In 2017/18
12.07% In 2022/23
2022/23
45.86%
Median hourly pay gap
3. The industries with historically highest GPGs have made some progress to close pay gaps over the six reporting years. Although we see the biggest reduction in GPG across industries with relatively lower pay gaps, such as the Public Sector and Manufacturing, some of the traditionally male-dominated sectors such as Mining & Quarrying and Technology have also reported some significant decreases in GPG over the reporting period. Additionally, many of these industries have experienced the most significant increase in the percentage of females occupying positions in the Upper and Upper Middle quarters.
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Trend 1: Gender Pay Gaps Hourly pay and bonus pay
Bonus Pay Gap It is harder to identify any major trends in relation to bonus pay gap movement due to the variable nature of bonus payments, which are often determined by individual and company performance. Mean bonus pay gap has varied over the period but has ultimately widened from 16.8% to 18.5%, while median bonus pay gap narrowed sharply between 2017/18 and 2018/19 before remaining relatively consistent from 2020/21 onwards, at c. 6%. Anecdotally, we have not observed any discernible contributing factors to this shift in median bonus pay gap, such as a previous trend of females receiving higher bonuses than males. However, the definition of bonuses for GPG reporting is broad and nuanced. For example, long-term incentive awards delivered via securities are only included in the bonus calculation at the point in which the recipient incurs an income tax charge. This can contribute to bonus pay gaps fluctuating, leading to a notable impact on mean calculations. This bonus pay gap shift could also be attributed to companies becoming more accustomed to the Regulations or entities adopting a more advanced approach to data collection/GPG calculation, which in turn enables more accurate reporting.
Hourly Pay Gap We see a slight year-on-year reduction in both mean and median hourly GPGs, as shown in Fig. 1 below. This corresponds to a 14% and 9% decrease for the mean and median, respectively. Considering this rate of change, it is projected that it will take c. 37 years for the mean hourly pay gap to reach 0%, and about 63 years for the median hourly pay gap to be closed. It’s important to note that the limited extent of this change could be attributed to two main factors: X The statistical nature of the assessment i.e., with such a large dataset, and each participating entity taking an average hourly pay to calculate the gaps, substantial overall annual changes are unlikely X Many measures taken by companies to address GPG are long-term in nature and would require actions over many years to show a positive change.
Fig. 1: Gender pay gap Hourly pay gaps
Fig. 2: Bonus pay gap Bonus Pay Gaps
Median Hourly
Mean Hourly
Mean Bonus
Median Bonus
10% 12% 14% 16%
10% 15% 20% 25%
0% 5%
0% 2% 4% 6% 8%
2017/18
2018/19
2019/20
2020/21
2021/22
2022/23
-25% -20% -15% -10% -5%
17/18 18/19 19/20 20/21 21/22 22/23
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Trend 1: Gender Pay Gaps Direction of travel
Fig. 3: Gender pay gap changes
Approximately 83% of the companies in our analysis reported a positive mean hourly gender pay gap in 2022/23 in comparison to 89% of companies in 2017/18. As shown in Fig. 3 opposite, over half of the companies included in our analysis have made a positive move towards closing their mean or median GPGs between years 2017/18 and 2022/23.1 However, a significant number - over a third of all reporting entities – have experienced an increase to their mean or median GPGs when comparing year 2022/23 to 2017/18. With respect to bonus pay gaps, we also see a greater number of entities which experienced a narrower mean or median bonus gap in 2022/23 in comparison to 2017/18. A large proportion of entities reported no change to their bonus pay gap, but this is most likely due to bonus plans/payments not being in operation (and, therefore, the bonus pay gap was and remains at 0%).
Gap closing
Gap widening
No Change
1%
100%
4%
21%
28%
34%
80%
40%
32%
60%
29%
40%
65%
56%
47%
20%
42%
0%
Mean Hourly
Median Hourly
Mean Bonus
Median Bonus
It is important to note, however, that of all the entities within the data sample, only a very small proportion (c. 1%) indicated a constant year-on-year reduction in gender/bonus pay gap over the reporting period. This analysis gives rise to an important question. If more entities have reduced their pay gap between 2017/18 and 2022/23, why don’t we see a greater reduction in the overall average pay gaps? A contributing factor from a statistical standpoint may be found in the % movement we observe for entities that have experienced a pay gap closing or widening. Across all gender pay gap elements, we see companies experiencing comparable reduction/increase in their GPGs (on an average basis, in terms of absolute percentage points) which is likely to be the driver behind the insignificant overall movements.
Average change over the reporting period
Mean Hourly
Median Hourly
Mean Bonus
Median Bonus
Pay Gap Change
Gap closing
6.6%
7.3%
32.9% 30.8%
40.9% 48.8%
Gap widening
6.1%
7.1%
It should be noted that the average of the mean hourly pay gap for companies reporting a widening pay gap moved from 11.5% in 2017/18 to 17.6% in 2022/23, while the average pay gap for companies reporting a closing pay gap moved from 19.1% in 2017/18 to 12.5% in 2022/23.
1. Analysis excludes companies which had a negative GPG in both the first and last reporting year (i.e., females were paid more than males), or where negative GPG reported in first reporting year moved to GPG of 0% in the last reporting year, or vice versa.
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Trend 2: Female representation Hourly pay quarters
Body subheading Second level subheading Body Text X Bullet 1 – Bullet 2 – Bullet 3
We observe a positive movement between 2017/18 and 2022/23, albeit a very small one, in the representation of female employees positioned in the Upper and Upper Middle hourly pay quarters, as shown in Fig. 4 below.
Fig. 4: Female representation in hourly pay quarters Female presentation in hourly pay quartiles
Upper
Upper Middle
34% 36% 38% 40% 42% 44% 46% 48%
2017/18
2018/19
2019/20 2020/21
2021/22
2022/23
4.9% Upper quarter
2.0% Upper Middle quarter
Increase of female representation between 2017/18 and 2022/23
The quarter analysis plays a pivotal role in evaluating the impact of the Regulations. The increase in the proportion of females in the Upper and Upper Middle quarters signifies a greater presence of women in higher-paying positions in their respective reporting entities, which is a critical shift needed to close the GPG. Overall, this is a positive trend over the last six reporting years, demonstrating that entities are making a slow but stable progress in increasing the female representation in top pay quarters. We do observe a small deviation from this trend in 2020/21 and 2021/22. This is most likely due to the COVID-19 pandemic which had a disproportionate impact on women’s employment, including those in senior positions.2 The rise in 2022/23 is an encouraging development. However, the setbacks caused by the pandemic once again highlight that increasing the number of women in employment generally and in senior higher paid positions is a complex process which cannot be resolved through company initiatives only, and requires wider societal actions.
2. https://www.mckinsey.com/featured-insights/diversity-and-inclusion/seven-charts-that-show-covid-19s-impact- on-womens-employment.
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Trend 2: Female representation Bonus recipients
In addition to more women now placed in relatively higher paid roles, we also observe an increase in the number of women receiving a bonus between 2017/18 and 2022/23, as shown in Fig. 5. We also see a consistent rise in the percentage of male and female bonus recipients over the six reporting years, although it should be highlighted that the female population receiving a bonus experienced a bigger jump. This development again suggests that companies are either taking positive actions to increase the proportion of female employees eligible for a bonus or are changing their reward practices to ensure pay decisions are taken in a fairer way, in line with their wider DE&I agendas. However, it is worth noting that, on average, males continue to be more likely to receive a bonus payment compared to females.
Body subheading Second level subheading Body Text X Bullet 1 – Bullet 2 – Bullet 3
Bonus recipients Fig. 5: Bonus recipients by gender
Male
Female
35% 36% 37% 38% 39% 40% 41% 42%
2017/18 2018/19 2019/20 2020/21
2021/22 2022/23
9.4% Male
11.2% Female
Increase in bonus recipients between 2017/18 and 2022/23
Nevertheless, the above findings are somewhat intriguing, especially noting that there hasn’t been a discernible trend of a consistent increase to the number of individuals receiving annual bonuses as a general practice. The slight increase in earlier years could be attributed to companies becoming progressively more adept at understanding the regulatory landscape and identifying the specific pay components that qualify as bonuses under the Regulations. Additionally, the sharp increase we see in 2021/22 could most likely be attributed to one-off payments provided by companies to support with rising inflation and the cost-of-living crisis rather than standard bonus payments.
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Trend 3: Industry developments Hourly pay gaps
However, such initiatives are unlikely to lead to an immediate reduction in pay gaps. Arguably, they could even contribute to the widening of pay gaps as more females join entry or lower-paid roles within these industries. Therefore, it may come as no surprise that our analysis sees the highest median reduction in mean or median hourly GPG between 2017/18-2022/23 in the industries with relatively low hourly GPGs (see Fig. 7). However, it should be noted that three of the Top 5 Industries with highest hourly GPGs – Mining, Professional and Technology, have reported a significant decrease in mean or median hourly GPGs figures over the reporting period.
Fig. 6 below shows the mean and median hourly pay gap per industry for 2022/23. As expected, industries that are widely perceived as male-dominated, both in terms of the male composition within the workforce and the prevalence of male employees in higher-paying positions, exhibit the most substantial hourly pay gaps.
Fig. 6: Average 2022/23 hourly GPG by industry
Mean hourly pay gap
Median hourly pay gap
Financial Services Construction Technology Mining and Quarrying Professional, Scientific & Technical Education Arts, Entertainment & Recreation Energy Retail Real Estate Administrative & Support Services Agriculture, Forestry and Fishing Health & Social Work Manufacturing Transportation & Storage Hospitality Public Services Utilities Financial Services Professional, Scientific & Technical Arts, Entertainment & Recreation Retail Real Estate Administrative & Support Services Agriculture, Forestry and Fishing Hospitality Public Services Utilities
Fig. 7: Industries with highest median reduction in mean hourly GPG or median hourly GPG (on a company-by-company basis)
Median hourly GPG
- 20%
- 30%
- 15%
- 16%
- 31%
Mean hourly GPG
- 14%
- 18%
- 13%
- 25%
- 26%
Public Services Manufacturing Mining and Quarrying Agriculture, Forestry and Fishing
- 18%
- 21%
- 13%
- 38%
Technology Arts, Entertainment & Recreation
0% 5% 10% 15% 20% 25%
These pay disparities are impacted and potentially exacerbated by the high average pay levels within these industries. According to the Office for National Statistics, Financial Services, Mining and Quarrying, Professional, Scientific and Technical, and Technology rank among the top five sectors with the highest average weekly earnings. There has been a heightened effort recently to increase female representation in traditionally male-dominated fields, often through initiatives like increasing females on graduate schemes or actively recruiting women into these sectors.
It will take some time to close the GPG in industries such as Financial Services or Construction. However, the increased presence of females within these industries should play a crucial role in eventually narrowing these pay gaps as women progress through the ranks within their respective companies.
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Trend 3: Industry developments Hourly pay quarters
A notable connection can be observed between the industries that have witnessed a larger increase in the percentage of females in their Upper and Upper Middle quarters (calculated as a median increase, on a company-by-company basis) and those that have, on average, experienced a significant reduction in hourly pay gaps. Notably, industries like Manufacturing, Technology, and Professional, Scientific & Technical fall into this category. We also observe that industries such as Construction, Manufacturing, Technology, Mining & Quarrying, Energy, and Transportation & Storage which show the lowest proportions of females in their Upper and Upper Middle quarters, all measuring below 30%, have reported the highest increase in females represented in both or either of the top pay quarters over the six reporting years.
Fig. 8: Female representation in the Upper quarter by industry
2017/18 2022/23 Difference
10% 12% 14% 16% 18%
10% 0% 20% 30% 40% 50% 60% 70% 80%
2% 0% 4% 6% 8%
Fig. 9: Female representation in the Upper Middle quarter by industry
2017/18 2022/23 Difference
-5% 0% 5% 10% 15% 20%
10% 0% 20% 30% 40% 50% 60% 70% 80%
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Appendix EU Pay Transparency Directive
In March 2023, the European Parliament voted in favour of adopting the EU’s Pay Transparency Directive (‘the Directive’) aiming to improve the application of the principle of equal pay through several measures focused on pay transparency. The Directive needs to be formally adopted by EU member states and will be transposed into national law within three years. The new legislation will not apply to UK companies, unless they are a UK registered business with operations in an EU member state, in which case, they will be required to comply with the EU reporting requirements for those operations.
Recruitment
Right to information
Employers must disclose the starting pay rate or salary range in the job listing or prior to an interview. It will be prohibited for employers to inquire about a candidate’s salary history. All job listings and titles will have to be gender neutral.
Employees have the right to obtain information about their own pay level and the average pay level for colleagues who perform the same work or work of equal value, categorised by gender.
Pay criteria
Pay reporting
Employees will have the right to access the criteria used to define pay levels and pay rises. Criteria related to pay progression can include individual performance, skills development and seniority.
Employers with at least 100 employees will have to regularly run gender pay gap assessments. Where differences in average pay for the same work or work of equal value between female and male workers are not justified by objective gender-neutral criteria, the employer should take measures to remove the inequalities. Employers will need to take corrective measures where the difference in average pay levels between male and female workers exceeds 5%.
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Area
The Directive
UK Legislation
The Directive has differing thresholds for reporting frequency depending on employee headcount. Employers with: X More than 250 employees must report every year X Between 100 and 249 employees must report every three years X Less than 100 employees may report on a voluntary basis. The implementation of the Directive reporting timeline is likely to differ depending on the above thresholds. The Directive currently indicates that all workers are in scope providing they ‘have an employment contract or employment relationship as defined by law’. The Directive does not specify different treatment for workers who have received reduced pay due to absence. The Directive currently stipulates that compensation data (both ordinary and variable pay) relates to the 12 months of the previous calendar year. The Directive provides a brief overview regarding the classification of pay elements. Specifically, it provides details about what pay elements fall into variable pay: bonuses, overtime compensation, travel facilities, housing and food allowances, compensation for attending training, payments in the case of dismissal, statutory sick pay, statutory required compensation and occupational pensions.
GPG reporting is only a requirement for entities with at least 250 employees in England, Scotland and Wales on the relevant snapshot date.
Reporting criteria
Classification of employees
Ordinary pay data relates to the pay period in which the snapshot date falls, while variable pay data relates to variable pay received in the prior 12 months ending on the snapshot date. People with a contract of employment with the Company, including if they work part-time, job-share, on leave, apprentices, certain types of contractors, and certain non-GB based individuals are all in scope. The UK legislation further categorises in scope workers into two buckets: full pay relevant employees (relevant for ordinary pay gap analysis) and relevant employees (relevant for variable pay gap analysis). Ordinary Pay: Basic pay, cash allowances, piecework payments, holiday and leave pay, shift premium pay. Bonus Pay: Generally irregular or one-off payments (commission, exam awards, profit sharing, bonus, recognition, LTI payments and vouchers). Excluded: Overtime, related payments and on-call payments, Pension contributions, pay relating to leaving, non-cash benefits, Interest free loans, payments relating to other pay periods and business expenses.
Data period
Classification of pay
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About us
Who are we
Nora Sherman Director
Andrea Bunbury Associate Director
David Ellis Partner
+44 (0) 7800 682 160 david.ellis@bdo.co.uk
+44 (0) 7468 740 327 nora.sherman@bdo.co.uk
+44 (0) 2078 933 150 andrea.bunbury@bdo.co.uk
What we do The Strategic Reward Advisory Team at BDO helps Remuneration Committees and management teams create effective reward strategies that are fit for the future and deliver interventions to support long-term business success. We advise clients on all aspects of executive remuneration, including remuneration strategy, remuneration policy drafting and reporting.
We are deep remuneration specialists, with technical and commercial experience, and we guide our clients through the design, implementation and operation of their new reward framework. Our advice is always led by our client’s business imperatives, and considers the applicable regulatory environment, stakeholder interests and sentiment.
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Below we provide an overview of our services in the executive remuneration and broad-based reward space:
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A key tool in enabling the delivery of broad based reward projects. It enables us to ‘value’ roles (to work out how much to pay) and provide structure and hierarchy to an operating model.
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